An easy choice?

If you could choose between Barry Obama or "Socks" as President, who would you choose???

Yes, me too! But I'm afraid Socks will not be available as he was finally put down a few weeks ago after years of serving the nation during the Clinton Administration. You won't be so lucky as you will, in all liklihood, have to endure Obama's misguided policies for decades to come...

Interesting report from Business Monitor International… As per usual, the “real” economic community (not CNN analyst with an AA in broadcasting) differs greatly from what you’ll hear from Executive Branch and Congressional Majority. Have a close look at the “Risks to Outlook” section below.

Only other shoe to drop is the level and extent of dollar devaluation due to massive increase in M2 by new administration/congress… Get ready to make friends with Inflation…

BMI writes:

"Our new -2.8% real GDP growth forecast reflects in part the base effects from Q408, whose -6.2% q-o-q annualised growth result means that the US economy has even further to go to achieve growth in 2009. It also reflects the deteriorating global environment, which will all but eliminate the ability for the US to export its way out of trouble; the likely failure of further banks, which will continue to hurt the availability of credit, the lifeblood of the economy; and the uncertainty of public economic policy, which we do not think in any case will do enough to stave off the worst US downturn since the Great Depression. Overall, US GDP in nominal terms is set to shrink by 1.9%.

The bottom line is that the US is set to consume, borrow, and import less, while saving and exporting more. Although in the long run, these changes will make for a healthier, more sustainable economy, there will be some severe pain along the way. While the conditions will not be nearly as bad as they were during the Great Depression of the 1930s, they will be bad enough to make this a 'Great Recession'. "

Further bad news for the housing market, follows:

"Housing market has further to fall: One of our preconditions for a US recovery is a bottom in the housing market, as the residential mortgage fiasco is at the heart of the downturn in many ways. The housing market is clearly in depression, and we do not believe that we have yet arrived at a bottom for housing prices by any stretch of the imagination. The inventory of available houses is at over nine months, versus below five months prior to the housing boom earlier this decade, although mercifully, this number is declining. Various estimates have put the percentage of mortgage holders that are in negative equity is one in 10, with some forecasts in the marketplace of a 25% ratio at the bottom of this cycle. In any case, the Federal Reserve has estimated that household percent equity has reached an all-time low, of 43.0%. According to the Case-Shiller indices of prices in 10 major US cities, house prices have fallen by nearly 30% from their peak. We believe that house prices could fall by 50% or more peak-to-trough, given the recent historical data offered from other residential housing bubble-and-bust economies, such as Hong Kong and Japan in the 1990s. As such, writedowns on mortgage-backed securities will continue, and household wealth will continue to be destroyed."

Finally, the excessive marketing from the White House and Congress about the efficacy of the myriad bailout packages now plummets towards its manifest destiny as a failed portfolio of ill-formed rescue packages dutifully follows BMI's Risk Outlook section below:

"Risks To Outlook

Proponents of an early economic recovery typically point to two factors: monetary policy and fiscal stimulus. While we believe that these will certainly help to cushion the blow, it will simply not be effective enough to prevent a severe contraction. We have already staked out our position on the inefficacy of monetary policy in the midst of a debt-deflation spiral. Take, for example, the destruction of wealth: with households losing US$12.8trn in net worth since the beginning of Q307, the Federal Reserve's US$900bn increase in the adjusted monetary base does not appear that large. While in normal times, that base money would be multiplied by bank lending, the effective insolvency of many major institutions, and the mindset of deflation, mean that monetary stimulus is not going to have the same bang for its buck as it usually does.

We would also caution that while the fiscal stimulus package is going to have some effect, much of it is not going to kick in immediately, and it is no substitute for the economic dynamism of the private sector, especially over the long run. In fact, we would argue that one of the biggest contributors to the lack of confidence is the uncertainty over the public policy outlook, as evidenced by the gyrations of the stock market upon news that the government has decided to change tack once again. "

Socks, where are you when we need you?!?

Best,

Mike